Shares buyback or shares repurchase (private limited company)
A share buyback is where a company purchases its own shares from its shareholders.
There are some common reasons for a company to buy back the shares from its shareholders:
(1) To provide an exit route for shareholder: A shareholder may want to exit from a company, say for retirement or for his own personal reasons but the existing shareholders do not want to purchase his shares or no third party buyer is available, then the company may choose to buyback the shares from that shareholder.
This way, a third party does not gain an interest in the company and the remaining shareholders do not personally have to pay any money to the outgoing shareholder.
(2) Employee incentive scheme: A buyback can also be used to purchase shares issued to an employee under an employee incentive scheme or share option scheme when the shareholder ceases to be employed by the company.
(3) To return surplus cash to shareholders: A company may have surplus cash as a result of profitability or the sale of business or having cash in readiness of a potential acquisition or expansion plan has fallen through. If the company does not have any planned use of the excess cash, shareholders may want the surplus cash returned to them through a buyback of shares by the company.
For legal advice and services on shares buy back or share repurchase of private company in Hong Kong, please contact CHOW & CHEUNG, Hong Kong Solicitors & Notary Public [ Tel: +852 2856 3799 or Email: firstname.lastname@example.org]